Committee of the Whole
Council of the District of Columbia John A. Wilson Building
1350 Pennsylvania Avenue N.W., Suite 410
Washington, D.C. 20004
Ladies and Gentlemen:
The ERISA Industry Committee (“ERIC”) is pleased to submit written testimony to the Council of the District of Columbia on the various proposed paid leave legislation (“Paid Leave Bills”) concerning DC Law 21-264, the Universal Paid Leave Amendment (“UPLA”) Act of 2016, which became effective April 7, 2017.
I. ERIC’S INTEREST IN THE PROPOSED REVISIONS
ERIC is the only national association that advocates exclusively for large employers on health, retirement, and compensation public policies at the federal, state, and local levels. ERIC’s members provide comprehensive paid leave benefits to tens of millions of workers and their families. ERIC has a strong interest in proposals, such as the Council of the District of Columbia’s (the “Council”) Paid Leave Bills, that would affect its members’ ability to provide quality, uniform, and continuous paid leave benefits.
ERIC is grateful for the opportunity to provide comments on the Council’s Paid Leave Bills and how they will affect our members. We share the same goal of increasing access to paid leave in all forms—e.g. sick, family, and parental—for America’s workforce, but believe it should achieved in a way that does not burden employers already offering adequate paid leave. ERIC members should have the flexibility to establish paid leave programs that best fit their industry of practice and individual workforce, not be subject to a one-size-fits-all mandate.
ERIC urges the Council not to adopt any proposed legislation that would further increase the administrative and compliance burdens on large employers already providing paid leave benefits to their employees. Likewise, large employers’ flexibility and ability to design their own leave benefits that meet the needs of their business and workforce should not be infringed. Many large companies tailor their paid leave plans to meet the overall compensation and employee benefits goals of the company, and are tailored to their industry, competitive environment, and the needs of their workers (i.e., ERIC member companies and other large employers do not utilize one-size- fits-all model for paid family leave).
II. BACKGROUND
The Council approved the UPLA with a 9–4 majority vote on December 20, 2016. It was then signed into law and became effective on April 7, 2017, after Congress’s mandatory 30-day review period. Broadly speaking, the UPLA establishes minimum weeks of paid leave, sets contribution rates for employers, defines who qualifies for paid leave, and sets the benefit amount to be received while on leave. The UPLA’s underlying objective is to provide workers in the District of Columbia with a minimum of six weeks of paid family leave, two weeks of paid medical leave, and eight weeks of paid parental leave. The benefits would be paid to workers out of a universal fund run by the District, and funded by employer contributions through a payroll tax.
Before the UPLA was enacted, the District of Columbia signed into law the Accrued Sick and Safe Leave Act of 2008 and the Earned Sick and Safe Leave Amendment Act of 2013. These acts enabled those working in the District to receive paid leave benefits to take care for themselves or a family member. Under these two laws, employers with 1–24 employees were required to provide three days of paid sick leave, those with 25–99 employees were required to provide five days, and employers with 100 or more were required to provide seven days.
The UPLA now requires employers of all sizes to provide a minimum amount of paid family, medical, and parental leave; all in addition to paid sick leave.
III. SUMMARY OF COMMENTS
ERIC appreciates the opportunity to provide comments on the Council’s Paid Leave Bills, how they impact the UPLA, and inform the Council to which piece of legislation is best able to decrease any compliance and financial burdens for large employers who already offer sufficient paid family, medical, and parental leave plans.
The UPLA in its current form places undue burdens on employers, particularly those that already have comparable leave programs in place. The burdens come in the form of, among other things, costs on employers to change existing policies, institute new administrative procedures for running a new program, and, most directly, the mandatory contribution rate of 0.62 percent payroll tax. These burdens have the potential to adversely impact associated employee benefits offered by employers; as well as, result in a chilling effect on employers that desire to implement paid leave programs internally due to increased oversight and outside involvement.
The following is a summary of ERIC’s comments, which are set forth in greater detail below:
The Paid Leave Bills being considered by the Council amend the UPLA and its current financing structure. Each, in its own way, decreases the contribution amount employers must contribute to the Uniform Paid Leave Implementation Fund, thereby reducing overall costs for businesses operating in the District of Columbia. One of the Paid Leave Bills should be adopted by the Council and amend the UPLA. The Large Employer Paid Leave Compensation Act of 2017, B22-0302 (“B-302”), introduced by Councilmember Jack Evans is the best option of the pending Paid Leave Bills to lessen any unnecessary compliance burdens on large employers. ERIC supports its member companies by advocating for legislation that alleviates burdens that infringe on their rights to continue offering generous paid leave policies to thousands of workers.
IV.DISCUSSION
Potential Cost Savings from ULPA Alternatives
The ULPA would be a costly endeavor to undertake since, according to the District’s City Administrator, Rashad Young, at the Council’s October 10 paid leave hearing, there is currently no infrastructure to build a program under the law, no personnel to staff the new program, standard operating procedures still need to be developed, regulations have to be written and approved, and more. These are some of the high costs associated with creating a wholly new program.
The Paid Leave Bills currently under discussion by the Council can substantially reduce these startup and other costs for both the District and employers. Each bill that has been introduced either reduces the 0.62 percent employer contribution rate into the paid leave fund, incorporates an employee contribution into the fund, or eliminates the use of the fund by creating an employer mandate. ERIC requests that the Council support a plan that most effectively amends or repeals the UPLA in order to minimize burdens and costs for employers; thus, giving them back the flexibility of designing benefits for their own employees.
The Large Employer Paid Leave Compensation Act Is Least Impactful on Large Employers
- General Comments
B-302, also known as the Large Employer Paid Leave Compensation Act, would create an employer mandate of paid family and paid parental leave. Effectively, this bill would—as some councilmembers have described it—repeal and replace the UPLA. While members of the community and the Council have expressed their opposition to this bill, B-302 is the best first step in the right direction in transitioning to providing paid family leave to thousands of District workers.
B-302 is the best alternative because it does not include a public program, erases the employer payroll tax, and creates a less prescriptive mandate on employers.
B-302 only creates a mandate for employers with twenty-five or more employees, thereby relieving smaller employers of the burdens under the UPLA. Large employers, while still mandated to do so, would be afforded more control and flexibility in designing and implementing the paid leave policies and programs they offer. B-302, unlike the UPLA, does not include a public program. As mentioned above, the public program would be costly and timely as there is currently no infrastructure for which to build from. Adopting the employer mandate under B-302 would buy time for the District to establish the necessary infrastructure, but also allow for the mandate to become effective quicker (i.e. as soon as 2018).
- Benefits Provided and Costs Under the Large Employer Paid Leave Compensation Act
The UPLA would provide employees with a minimum of six weeks of family leave, two weeks of medical leave, and eight weeks of parental leave. B-302 would mandate the same amount of paid family and parental leave, but would eliminate the mandate for medical leave. Facially this is a perceived loss, but under B-302 and existing District law it would not be.
Under the Accrued Sick and Safe Leave Act (“ASSLA”), employers with twenty-five or more employees must provide five or seven days of paid sick leave depending on size. This Act covers both employees and employees’ family members, meaning they can receive paid sick leave benefits to care for themselves or a family member. Paid sick leave, traditionally, is meant to dovetail short term disability which most large employers provide to their employees (i.e., acting as paid medical leave for serious medical conditions that take longer than a few days to recover from). While not all smaller employers provide short term disability, and even though the number of paid sick days do not equal the two weeks of medical leave as provided for under the UPLA, the ASSLA is a system that has been in place for years, is one that employers and employees already know and understand, and allows for leave to be taken by all employees regardless of size. B-302 would maintain the level of paid family and parental leave benefits as the UPLA, which is an increase over current law.
Eliminating the mandate on medical leave allows employers to retain some level of flexibility to design and offer this type of leave in manner best suited for their individual workforces. While a mandate is not ideal, it is not as burdensome on large employers as has having a payroll tax attached, since many of ERIC members in particular already offer generous policies in this respect.
Costs under B-302, for both employers and the District, are expected to be less drastic. While administrative costs would still be a reality under B-302, they are anticipated to be less than those under the ULPA. This would be the result of eliminating a public program, reducing compliance requirements, and giving employers the ability to choose what works best for them and their employees. The elimination of the payroll tax and the fund are major cost savers. If the UPLA progresses as passed, contributions to the fund would not have to begin until July 1, 2019. Although this appears to give employers ample time to prepare, there are countless behind-the- scenes changes that would have to be made that come with various administrative and enforcement costs. Without the program, these costs and burdens disappear. Furthermore, the elimination of a payroll tax would allow employers to divert those funds and associated resources to other benefit programs.
- Benefits of the Hardship Exemption
B-302 also includes a hardship exemption for employers. The exemption under Section 117 would give the Mayor the power to create rules that exempt employers from the bill’s requirements if they “can prove financial or operational hardship as a result of [the bill].” At the Council’s hearing on paid leave on October 10, Chairman Phil Mendelson described this exemption as meant for employers that could not “feasibly” provide the requisite leave under the bill. While the intention for this exemption was intended for smaller-sized employers, it would also be beneficial to large, multistate employers that have business in the District.
Law and policymakers regularly overlook the difficulty and consequences large employers face in altering existing paid leave policies. It is not simply the requirement to begin offering something new, it is a complete restructuring of internal processes and personnel in order to accommodate a newly passed law or ordinance. Under the UPLA, large, multistate employers would have to alter their policies, multiple payroll systems, standard operating procedures, and more to ensure uniformity and compliance. Since most large employers strive to maintain uniform policies across state lines and provide equal benefits to all employees, they must take the extra steps to synthesize all paid leave laws into one policy that can be applied uniformly. Much of this work often falls on the shoulders of human resource professionals. These individuals become burdened with ensuring accuracy and efficiency in transitioning thousands or millions of workers to a new system.
The hardship exemption offered by B-302 would allow ERIC members and other large employers to continue employing the paid leave policies and procedures that they have been utilizing for years. These policies have been fine-tuned to remain uniform, consistent, and in compliance with all applicable laws across the country. To require a drastic change in policies at this stage would create both a financial and operational hardship, and to have a law that does not offer such an exemption for this instance would be harmful and problematic for both employers and employees.
V. CONCLUSION
ERIC appreciates the opportunity to provide written testimony on the Council’s Paid Leave Bills. We understand the Council and the District of Columbia’s goal of providing paid leave benefits to its workers, and seek only to ensure that revisions best fit the needs of organizations and by extension, are implemented in a manner that will increase employee well-being.
If you have any questions concerning this testimony, or if we can be of further assistance, please contact Bryan Hum at bhum@erig.org or 202-627-1917.
Sincerely,
Bryan Hum
Associate, Retirement & Compensation Policy